THE pound has tumbled against the Australian dollar today, with the GBP/AUD pairing falling to its lowest exchange rate since April 2017.

GBP/AUD is currently coming in around the AU$1.6455 mark, and part of Sterling’s weakness stems from a surprise drop in UK inflation.

In May, annual UK inflation hit 2.9 per cent. Predictions for June had been for an unchanged figure, which would leave inflation almost 1 per cent higher than the Bank of England (BoE) target (2 per cent).

Instead, the rate of inflation fell to 2.6 per cent – above the rate of wage growth but still signifying weaker consumer price pressures than anticipated.

Previously, higher inflation was used to argue that the Bank of England (BoE) would have to raise interest rates as a way of combatting the higher cost of living. With this latest slide, the odds of a near-term rate hike have been lowered.

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With that in mind, the current RBA interest rate of 1.5 per cent means that there could be 2 per cent of rate increases over the next few years, a fact that has raised the appeal of the Australian dollar.

NAB Chief Economist for Markets Ivan Colhoun put this into context.

He said: “The neutral nominal rate, not unlike the [Federal Reserve’s] 3 per cent long-term interest rate projection, is a long way higher than where the market is currently trading, hence the negative reaction at the short end of Australian rates and the bid for the Australian dollar.”

With the inflation news now come and gone, the next UK data to focus on is Thursday’s retail sales figures.

The consumer spending stats are predicted to show growing sales on the month and the year in June.

Such results could help the pound recover losses.

The Australian dollar’s luck may run out on Thursday, however, when domestic jobs data will be published. In June, a 15k rise is forecast for the number of employed persons, but the unemployment rate is predicted to rise from 5.5 per cent to 5.6 per cent.